"I expect demand to remain firm in the last quarter of 2012 as well due to the festival and wedding season...although overall demand for the year could still decline to 800 tonnes due to the decline in the first half," Acharya added. India’s gold demand touched 933.4 tonnes in 2011.

The country’s gold demand recovered from a 38% fall in the June quarter to rise to 223.1 tonnes in the three months through September. The average gold price in the third quarter was $1,652 per ounce, down 3% from a year before, although the weak rupee has offset any gains for Indian buyers.

Global gold prices have gained 11% so far this year after recording 11 straight years of advance, although a nearly 5% depreciation of the rupee in 2012 has made purchases by Indians more expensive. The rupee has weakened 14.5% since hitting this year’s high of 48.61 against the dollar on February 3.

"Globally, demand for gold looks firm due to the loose monetary policy of the US (as it has improved liquidity in the market). Prospects for gold also brightened since the US elections earlier this month. In India, although elevated prices kept some buyers at bay earlier this year, demand usually firms up when prices drop a little," said Lakshmi Iyer, head of fixed income and products at Kotak Mutual Fund.

Analysts said the 4% import duty wouldn’t discourage buyers from purchasing gold, which also acts as a hedge against inflation, as returns are still better than many other investment instruments.

After gaining last week, however, gold dropped on Wednesday as shares and other commodities fell on lack of clarity about the new agreement to prevent debt-hit Greece back from going bankrupt and concerns that the steps taken by euro zone finance ministers may fail to bail out Greece. Spot gold fell 0.47% to $1,733.55 an ounce intraday, while US futures shed 0.49% to $1,733.90.